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The questions of whether, and if so how much, the return to saving ought to be taxed are of central importance in discussions of how to design or reform the tax system. This Briefing Note provides a description of how the UK tax system treats the return to saving. Some key findings are that:

• UK households hold their assets in a range of forms that face different tax treatments.
• These differences in tax treatment can equate to quite big differences in the level of the tax on the return to these assets.
• Differences in tax treatment can be due to the tax rates that an individual faces, as well as to the types of asset in which he or she chooses to save.
• Tax rates on the return to assets have generally converged over the last 30 years.

In order to undertake this description of the tax on the return to assets, it is necessary to address first some conceptual issues concerning how we measure the level of tax on returns. The inclusion of a discussion of these issues means that this note is somewhat more technical - in terms of discussion of taxes and economic concepts, and in terms of arithmetic content - than is typical for an IFS Briefing Note. Nonetheless, the note is intended to be accessible to individuals who are particularly interested in the policy or conceptual issues concerning the taxation of asset returns.

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